SOOOOOO lost please help please James A. Varney and Denise M. Varney 1. James and Denise Varney are married and file a joint return. James is 48 years of age and Denise is 49. James is employed full-time as an electrical engineer for Livingston Unitech Corporation, Ltd. Denise is a self-employed design consultant. They have two children, Pamela and Vernon, who live at home, did not earn any income, and receive all of their support from their parents. Pamela is 20 years old and attended college on a full-time basis, and Vernon is a 16-year-old high school student. The Varneys currently live at 3102 Willowpoint Drive, Boise, Idaho 83725, in a home they have owned since July, 2001. The phone number they wish to show on their tax return, if needed, is James's daytime office number of 208-984-8987. 2. Social security numbers (SSN) and birthdates (DOB) for James, Denise, and their children are provided below: James A. Varney (DOB: 11/5/1973) ...................................................................... SSN: 332-25-9610 Denise M. Varney (DOB: 4/12/1973) ................................................................... SSN: 333-51-9251 Pamela G. Varney (DOB: 11/6/2001) .................................................................... SSN: 452-19-6552 Vernon N. Varney (DOB: 2/12/2006) .................................................................... SSN: 452-23-5694 3. James, Denise, Pamela, and Vernon were covered by health insurance all year. They were not involved in any way with cryptocurrency. 4. Neither Denise nor James want to contribute $3 to the Presidential Election Campaign Fund. 5. James and Denise want to file their return on paper. 6. James received a Form W-2 for 2021 from his employer, Livingston Unitech Corporation, Ltd., 3445 Synergy Lane, Boise ID 83725 (EIN 68-3123857) which reported the following relevant information: Box 1: Gross wages and taxable benefits . . . . . . . . . . . . . . . . . $118,000 Box 2: Federal income tax withheld . . . . . . . . . . . . . . . . . . . . . . 21,500 Box 3: Social Security wages . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,000 Box 4: Social Security tax withheld . . . . . . . . . . . . . . . . . . . . . . . 7,316 Box 5: Medicare wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,000 Box 6: Medicare tax withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,711

7. Denise operates her business under the name "Design by Denise." Her office is located at 2359 Dawnridge Drive, Meridian, Idaho 83680. The federal EIN for her business is 51- 4867579 and the principal business code is 541400. Denise, who materially participates in her business, has operated it profitably for 3 of the last 4 years and is fully "at risk" with respect to her investment. She also has filed all required Forms 1099. 8. In accounting for her business, Denise uses the cash method. For 2021, her records show the following income and expenses. She participated in Jamess health insurance plan and did not have to pay any premiums. 9. In connection with her business, Denise often travels from her business location to the homes and offices of her clients, where she provides advice and expertise on interior design. During 2021, her written auto log shows that she drove her vehicle (a 2020 Mitsubishi Mirage that she purchased and put in service on May 13, 2019) 22,400 miles for business purposes, 3,800 miles for commuting, and 1,800 miles for personal purposes. Denise did not keep track of all her specific expenditures for the car and she wishes to deduct her auto expenses using the standard mileage rate for 2021. She has written evidence to support her mileage. The business car was available for use during off-duty hours, but she and her spouse also have another vehicle available for personal use. 10. Also in connection with her business, Denise purchased a Mac computer and HP laser color printer. The computer was purchased for $2,200 on November 10, 2021. The printer was purchased for $5,800 on September 30, 2021. Denise used both the computer and printer for business purposes at her office 85 percent of the time, and personal purposes 15 percent of the time, for which she has written evidence. Denise would like to deduct the maximum allowable amount on each of these assets. Gross receipts (not reported on Form 1099) . . . . . . . . . . . . . . . . . . . . . . $90,000 Gross receipts (reported on Form 1099; payer was Bernice Ngs Furnishings, EIN 68-8752318, nonemployee compensation) . . . . 25,000 Expenses: Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 Legal services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500 Office expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,300 Equipment and machinery rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800 Office rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,400 Subscriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500

11. In addition, Denise sold a storage building that she used in her business. She paid $30,000 for the building on January 12, 2016, and sold it on March 14, 2021 for $33,000. Her adjusted basis in the building at the time of sale was $26,027 (this number already takes into account the depreciation she is deducting for 2021). Denise depreciates the building using straight- line depreciation. The transaction was reported on Form 1099-S, and Denise has no prior year section 1231 losses. 12. Denise frequently buys scratch-off lottery tickets at the gas station, and this year she has receipts to show that she spent $345 on tickets. Her habit paid off, though, and she won $2,500 on one of her tickets. 13. James and Denise received Forms 1099-INT reporting in box 1 (regular or OID interest) or box 8 (tax-exempt interest) the following interest income during 2021: 14. James and Denise received Forms 1099-DIV reporting the following dividends during 2021. 15. James and Denise have neither a foreign bank account nor a foreign trust. 16. James and Denise received Form 1099-B from Morgan Stanley reporting the following stock sales during 2021. For all of the sales, the basis amount was reported to the IRS. Box 1 Box 8 Regular or OID Texas Johnson & Johnson . . . . . . . . . 700 . . . . . . . . . . . . . . . . . . . . . . 0 Caterpillar . . . . . . . . . . . . . . . . . 900 . . . . . . . . . . . . . . . . . . . . . . 0 Fidelity Tax-Free Bond Fund . . . . 0 . . . . . . . . . . . . . . . . . . . . . . . . 600 Box 1a Box 1b Ordinary Qualified American Sun Corp. . . . . . . . $400 . . . . . . . . . . . . . . . . . . . . $ 400 Global Genetic Dynamics . . . 200 . . . . . . . . . . . . . . . . . . 200 J.P. Morgan . . . . . . . . . . . . . . 300 . . . . . . . . . . . . . . . . . . . . 300 Corporation Shares Date Acquired Date Sold Sales Price Basis Box 3 Bishop Radiocorp, Inc. 600 2-15-21 9-18-21 $23,200 $18,175 McGowan Chemical 800 4-20-21 10-21-21 10,000 13,800 Total short-term $33,200 $31,975 Patel Royal Electric, Inc. 300 7-25-15 11-05-21 6,700 8,500 Agro Memory Group 100 3-10-14 12-12-21 9,400 7,000 Total long-term $16,100 $15,500

17. Statements describing the above sales are not being attached separately in lieu of Form 8949. 18. In a transaction not reported on Form 1099-B, James sold a painting on August 13, 2021 for $2,400. He bought the painting on July 27, 2003 for $300. 19. In August 2021, Pamela enrolled on a full-time basis for a bachelor's degree at Boise State University, 910 W University Dr, Boise, ID 83725 (EIN 82-0290701). Pamela graduated from Capitol High School in May and attended Boise State from August to December, 2021. In August, James and Denise paid $3,500 in qualified tuition for Pamela's first semester. In December, they paid another $3,500 in qualified tuition for her second semester beginning in January, 2021. Pamela received a Form 1098-T from the University reporting payments received for qualified tuition and related expenses of $7,000 in box 1. Box 2 is empty but Box 7 is checked. Assume that, if eligible, the Varneys want to claim credits rather than deductions for these expenses. 20. Neither Pamela nor Vernon have been convicted of a felony for possessing or distributing a controlled substance. 21. The Varneys received a total of $1,500 in advance child tax credit payments during 2021 (and they received letters 6419 confirming this number.) (Note that this information has to do with the special expanded child tax credit for 2021, and you will need it when completing Schedule 8812). 22. James and Denise made timely estimated Federal income tax payments for Denises business of $10,000 for the year ($2,500 each quarter on April 15, June 15, September 15, 2020 and January 15, 2021). 23. James and Denise incurred and paid the following personal expenses during 2021: Taxes: Real estate taxes on home (with State Street Bank (reported on Form 1098 together with mortgage interest- see interest, below) . . . . . . . . . . . . . . . . . .......... 2,691 State of Idaho income taxes withheld or prepaid during 2021............................. 10,100 Sales tax rate (State 6%; Local 0%).......... ......... . . . . . . . . . . . . . . . . . . . . . . . . . . 6% Interest: Home mortgage with State Street Bank (also reported on Form 1098 together with Real Estate taxes, see above) . . . . . . . . . . . . . . . . . . . . . . . 9,600 Cash contributions (all substantiated): United Way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500 Make A Wish Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,275

24. Use these check figures on Form 1040 and Schedule 1 to help you in preparing your return: Assignment: Complete the Varney's Federal income tax return for 2021. Assume that the Varneys are filing their return on time (i.e., before April 15, 2021, the point is we are assuming there are no late penalties). In preparing the return, you will need to use Forms 1040, 4562, 4797, 8949, 8863, 8995 and Schedules 1, 2, 3, A, B, C, D, SE, and 8812. (Note: you may need to print an extra p.2 for Form 8949. Another tip: I neglected to cover this and the IRS doesnt put it in the instructions, but to calculate qualified business income, you subtract the deductible portion of SE tax from net Schedule C profit.) The total tax return is approximately 28 pages. If the Varneys have a refund due, request that it be credited to their 2022 taxes. Assemble and your completed return for James and Denise Varney assembled as it would be filed with the IRS, then scan it and upload it in the appropriate place on Canvas. Tax forms should be assembled in the correct order (see #2, below). Input sheets, and taxpayer worksheets, however, should not be attached. Dont worry about any estimated payments that would normally be made with the return. Notes: 1. I have made the project simple enough to be completed by hand, and that is what you must do. It can be typed or hand-written, but it must be clear and legible. There are no points if I cannot read what you wrote. You can do what works for you, but I approach it by starting with Form 1040, then when you reach a line that requires information from another schedule or form, go to that schedule. For example, line 2a of the 1040 will direct you to Schedule B. Every form and schedule has IRS instructions which can be very helpful, and which you can find easily through Google. You may also find it helpful to look at all of the information and calculate what you think the taxable income, tax liability, etc. should be, before diving into the forms. Note that Form 4797 is a bit confusing, and you will want to start on Part III. 2. The correct assembly order for the Varneys tax return should be: 1040, Schedule 1, Schedule 2, Schedule 3, Schedule A, Schedule B, Schedule C, Schedule D, Form 8949, Schedule SE, Form 4797, Schedule 8812, Form 8863, Form 8895, and Form 4562. (Note: You can use the Attachment Sequence No. in the upper right hand corner of each form (except form 1040) as a guide, but the order given here is the correct order as well.) Business income (Schedule 1, line 3) . . . . . . . . . . . . . . . . . . . . .. . $ 46,496 Total income (1040, line 9) . . . . . . . . . . . . . . . . . . . . . . . . . . .. ... 180,394 AGI (1040, line 8b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177,109 Taxable income (1040, line 15) . . . . . . . . . . . . . . . . . . . . . . . . . . .. 142,747 Tax overpaid (1040, line 34) . . . . . . . . . . . ............................... 3,708

3. The project is due by Thursday, August 11. Please scan and upload it to Canvas. You may work in groups of up to 3 students, but you are not required to do so. Each student in the group should upload the project to Canvas separately, but be sure that each submission has the name of every group member. 4. Because tax forms are difficult to grade and you are given so many check figures, the project will be graded very strictly. However, DO NOT simply fill in the correct check figures if your supporting numbers dont actually produce those figures, and DO NOT simply make up numbers so that you get the correct check figures. That is the equivalent of fraud and can result in receiving zero points for the project.